Aboitiz Power wants LNG terminal investments shifted to gov’t

by Myrna Velasco – January 16, 2016

from Manila Bulletin

Aboitiz Power Corporation is taking a different view when it comes to liquefied natural gas (LNG) terminal investments as it wants government to be the lead or take ownership core of the facility and for it to be the gas seller also to power producers.

“It will be very difficult for one party to do that alone, we should have the government put up the terminal,” Aboitiz Power chief executive officer Erramon I. Aboitiz has opined.

He told reporters that the government must mandate the establishment of a terminal, then “power producers can just buy from that one.”

Aboitiz qualified in that way “LNG makes sense from an economic point of view even if the cost of fuel is expensive, it makes sense for peaking, it makes sense for mid-merit plants.” It is only then, he noted, that “you will see people start building power plants to be able to supply that portion of the demand.”

He reckoned that some groups – including First Gen of the Lopez conglomerate and the power generation arm of Manila Electric Company – have been taking serious steps on LNG investments, including the setting up of LNG terminals.

First Gen is presumably in a more advanced state on its investment plan, with the front-end engineering design (FEED) of its proposed LNG import-handling facility already completed.

Aboitiz indicated though “I believe all of us face the same problems on the cost of building a terminal of certain size,” stressing that the venture entails massive upfront capital outlay.

“We’ve been talking about natural gas – (LNG) and several groups in the power industry are actually looking at LNG. We know that First Gen Group is into LNG, they’re looking at it. We know that Meralco is also into it… but it will be very difficult for one party to do that alone, we should have the government put up the terminal,” he stressed.

Aboitiz is not also messianic about “percentage-set” fuel mix policy, emphasizing that such will be a very risky experiment for government policy to be casting on.

“I don’t believe in mandating certain mix. Like one-third, one-third, one-third because to do that is to say: what’s the cost of LNG versus other sources? So when you’re mandating something, you have to take into consideration the other factors that come into your decision, I think that is very dangerous,” he asserted.

He instead called on government that what it must do is “set policies not setting investments to a certain percentage, because we are under a market-based competitive framework.”

Aboitiz added “when we do a power plant, we are not sure yet who is going to buy our power, we’re not assured of anything, so we have to make sure we are competitive… so under that framework, how can government set the direction, incentivize the industry to go to that direction.”

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